Rep. Jeb Hensarling (R-Texas) recently said that Congress should repeal the Dodd-Frank legislation because the economic uncertainties it creates are detrimental to American businesses and consumers.
“Dodd-Frank was based largely on the premise that regulators lacked the authority to prevent Wall Street from taking outsize risks,” Hensarling said, according to Money News. “But, that was the wrong diagnosis — and it led, inevitably, to a prescription for the wrong remedy.”
Hensarling said that, while regulatory missteps did occur before the financial collapse, there are few examples that point to a lack of regulatory authority.
“Federal regulations were not the solution to the crisis but its principal cause,” Hensarling said, Money News reports. “Federal policy pushed financial institutions to lend money to people for home purchases they couldn’t afford.”
Additionally, Hensarling said that many of the subprime mortgages leading up to the 2008 financial crisis were backed by government-sponsored enterprises and other federal agencies. He added that Congress should seek to phase out and privatize GSEs.
“Other industrialized nations enjoy comparable or higher rates of home ownership without government dominance in their mortgage markets,” Hensarling said, according to Money News.
Hensarling also advocated for the repeal of the bailout authority granted by Dodd-Frank.
“The way to address the risks posed by financial institutions would be more transparent balance sheets and a meaningful application of capital and liquidity standards,” Hensarling said, Money News reports.